The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1887-05-20
THE UNION PACIFIC INQUIRY
Continuation Of the Testimony of Jay
Gould Before the Commission.
Why He Retired from the Management of the
Road-His Idea as to the Best Thing the
Government Can Do with Its Claim.

way Com mission cot to work, this morning. Jay
Gould resumed the witness stand. and the inaui-
sition was continued by Commissioner Anderson.
Mr.. Gould testified that the provisions of the
consolidated mortgage trust were strictly COM
piled with by the trustees and the bonds issued
Is therein provided. Dir. Gould was shown a
transcript of transactions in the consolidated
bonds furnished by the Union Pacific company,
which would seem to indicate that the trustees
had not followed the trust Mr.. Gould said that
was a Union Pacific account of which he eknew
nothing; that the true way to get at the matter
was to examine the accounts of the trustees kept
by Mr.. Calef, who could be got to make the nec-
essary explanations Said he: "The trustees
only charged the amounts named in the mort
gage; the accounts you show are of negotiations
with the Union Pacific, and they conld get their
own prices You will find that the accounts of
the trustees will balance with the mortgage.
Maxwell and Graves. to whom many of these
bonds were issued, were the brokers OF ST.
Louis party who had refused to convert his bonds.
Ny explanation of the transaction with these
brokers is that the Union Pacific first
acquired title in the bonds from the
trustees, and then disposed of them.
The provisions OF the mortgage prohibit the
requirement. of the bonds of the trust of the
Kansas Pacific, and the trustees would certainly
treat the successor company, the Union Pacific,
as though it the Kansas Pacific. Where
the commission is mixed up is that it is trying to
get at the dealings OF the trustees through set
of accounts of the Union Pacific which the trus-
tees had nothing 20 do with. The trustees deal
ings were not entirely with the Union Pacific
but the price OF these bonds went I'D so high
that holders would not convert, and the Union
Pacific went on the market and purchased them
for conversion at the best price they could. My
recollection is that the bonds bought by Mr.
Sage and myself were secured from the Union
Pacific. / never dealt in any of these securities
underlying the trust. put them IN at the rate
mentioned, and my books will now show this
fact" Mr.. Anderson said that he could not in
quire intelligently with reference to the CONVEX
sion of these trust securities without the &C
counts kept by Mr. CAlef.
Mr.. Gould gave Sergeant-at-arms Walsh note
directing Mr.. Calef to appear before the commits
sion with the books showing the issue of these
bonds.
Commissioners Littler here assumed the duties
Of inquisitor, and the witness continued: The
total Indebtedness of the Union Pacific Railroad
Company Dec IA, 1879. was $88. 472. 39l. consist
ing of the various issues of bonds. The out
standing issue of stock at that time was $780, 1872
300. The indebtedness of the Kansas Pacific at
that time was $35. 162, 518. The stock 3d.
30. $50, and the stock of the Denver Pacific, 81
600 900. My holdings with Union Pacific were
g. 700 900 stock and 81 900. 600 of bonds. l did
not hold a controlling interest at that time. By
releasing the SO, 000, 600 Denver Pacific bonds
made the consolidation mortgage for So. OO0.-
900 less. The outstanding consolidated
bonds to-day are $l6, 100000. When all of
verted the trust will have issued all of
the consolidated bonds. The Union Pacific
Railroad Company became the owners of the
"a. 10000 Denver Pacific stock by the consol-
ldation, and issued $4, 000 900 of its own stock
In place of it. They used SO, 464, l66 of this
stock to pay me. The only effect of the issuing
Of this stock was to increase the Indebtedness
If the Union Pacific, and the Denver Pacific
Stock is not an important factor in the matter of
1hia investigation, for that indebtedness could
have been made just well without reference
consolidation i
was the owner of the Kansas Pacific controlling
interest, and was in a position to dictate the
terms OF the consolidation. My holding in
Kansas Pacific at the time amounted to SO, 05S,-
024. / did not lose any money by the consolida-
ton. nor did make any, for the securities were
worth just much before as after the consol
idation. The indebtedness of the con-
solidated road was $l24.2l5,9O9, and
che stock $50. 762. 300. The object Of the
Pacific Railroad Company to the Union Pacific
Railway Company. was because it was new
child, and TO avoid mixing of accounts. My
friends and did not own controlling interest
In the stock of the Union Pacific and Kansas
Pacific roads during the time between 1873 and
1880, nor did we control the market by any con-
cerred movement. The prices were made by the
public who dealt IN the stock. My holdings re-
manned about the same all of the time. think
that the Union Pacific paid it's first dividend in
1876. I don't remember when it stopped 1t
never paid dividends except in accordance with
the charter provisions. l claim. IL were
creditor of the road like the government, l
sion of time in paying the subsidy. even though
the road were paying dividends. unless the gov
eminent wanted to take the road and run 1t. If
il did, there was a chance for 1t.
With reference to the building OF telegraph
line along the road, as provided by the act OF
Congress, Judge Dillon explained that the Union
Pacific company built the line as required but
that it is now used by the Western Union, which
pays a certain percentage on business over the
wire under contract
Mr. Littler here branched off from the subject
nClr Cor his FIR nafI n
Mr.. Goulds opinion with reference to the inter
state commerce bill. Mr.. Gould said: There
is a great deal of good and some bad in it 1
have not asked the commission for any change
yet / should prefer to wait year or two before
giving any definite opinion"
Amos H. Caief was recalled and produced the
journal Of the trustees of the Kansas Pacific
consolidated mortgage, which showed few
transactions on exchange when the pool and not
the mortgage rates controlled. Mr.. Calef went
to explain the entries in the trustees books
relating to the issuance of consolidated bonds
and the personal interests of Messrs. Gould and
Sage in the transactions
In reply to Judge billions question. Mr.. Gould
said that So 400 900 of the $50 900, 900 worth of
Kansas Pacific consolidated mortgage bonds
were set aside to purchase the pool bonds This
provision was on the face of the mortgages, and
the holders knew that the agreement had been
made 1T made no difference If we paid par
TO the Union Pacific for stock which 1t got for
less. The acquisition OF the Denver d South
Park road was polite action on the part of the
Union Pacific and brought me no great personal
profit. The stock and bonds of the ST Joseph
Bridge Company were at par at the time OF the
consolidation and were turned in at the face of
The bonds, bonds at 90 being received in return.
Kansas Pacific stock jumped up rapidly as it
leaked out was buylng LARGELY. ala 1t to pro-
tect my interest in Union Pacific and furnish
southern outlet, and not to affect the market. AS
soon as the Iowa roads prorared we turned the
traffic over the southern road and made money
for the Union Pacific. l made money by the
transactions, of course. / want to ex-
plain to the commission my motives in
making these large purchases. 1 have nothing
TO conceal AT present have no interest in the
Union Pacific. While connected with 1t
the company built several branch lines to act as
feeders. No individual made any profit out of
the building of these roads. the company build
Ing them at the actual cash cost. AS regards
the Central branch, the Kansas Central and the
st. Joe e. Western roads, l am willing TO take
Them off the Union Pacific's hands at the price
Il paid for them At the time of the consolida-
zion the Kansas Pacific was more valuable
property than the Union Pacific. 1t was put
into the consolidation st too high a value. The
racrr;tv of tha 0oyorument increased bv he